luxoft software development

1. For more information about Luxoft, visit
www.luxoft.com
www.luxoft.com/financial-services/
case study
Feed Consolidation Layer for Basel II
Compliance
Summary
13.09.2012
System used by Finance and Financial control departments of Bank is a unified data
repository which consolidates data from the numerous trade and valuation front
office feeds. System provides the trade data and reports on a daily basis.
uu Client: TOP10 global investment bank
uu Business Area: Regulatory Reporting and Compliance, Risk
Management, Middle Office
uu Asset Classes: Commodities, Equities, Equity Derivatives, Fixed Income,
FI Derivatives, FX, Loans
uu Technology Set: Oracle, Informatica, J2EE, Cognos
uu Integration: Trade and valuation data providers (mostly in-house)
around the world, Regulatory reporting and Risk management
applications, Accounting systems
uu User Profile: Finance and Financial control (over 100 users in multiple
locations)
uu Geography: Worldwide
uu Relationships Status: Ongoing ODC, T&M
uu Services Provided: Full cycle: Business analysis, Development, QA/
Testing, Maintenance
uu Team Size: 30+ team members
uu Duration: 3+ years

2. Business Challenge
Feed Consolidation Layer was originally established for Bank to conform to
Basel II regulatory requirements and for the better capital management.
Risk Weighted Assets (RWA) is a key metric for Bank, which has to raise
capital to cover its RWA requirements in case of the undercapitalization.
Both the absolute RWA level and the extent of variability and
unpredictability of RWA at the period end drive the level of the capital
needs to support Bank trading activities.
Bank processes and infrastructure existed in support of RWA metric
calculation, especially data delivery, were inadequate for the two primary
reasons:
uu Introduction of Basel II in 2008 with more sophisticated rules for
calculation of RWA.
uu RWA calculations ran just monthly and were based on the data
submitted from highly manual processes. Therefore only minimal ability
to actively manage projected RWA was in place and Bank needed
significant and uneconomic buffers in the capital to be aligned with the
regulatory capital requirements.
Bank recognized the need for the new data repository that would
collect all the information required. The repository had to make the data
available daily to achieve the two main strategic objectives:
uu Implementation of the sophisticated rules (internal models) for the
credit risk exposure calculation. The new models usage was to result in
substantially lower RWA metric being in compliance with the authorities
standards.
uu Ability to calculate“flash”RWA intramonth. The need was to be
supported by the both features: the ability to provide the data
intramonth and the capability to run the calculation intramonth.
The following requirements had to be met by the solution to support the
business.
uu Development of a unified data repository for consistent calculation and
reporting on Bank’s RWA.
uu Consolidation of the trade details.
uu Replacement of the direct front office application links with an indirect
feed.
uu Automatization of the manual extraction and enrichment processes for
the front office trade capture and valuation systems.
uu Unification of the daily and monthly processes to create the single
straight-through process.
02Luxoft - Case Study

3. Luxoft Delivered Solution
The solution was intended to support the following strategic needs of Bank:
uu Shift to weekly Basel II RWA calculation on the basis of the data available
via the repository.
uu Validation and correction of the data received earlier in the month.
uu Significant reduction of RWA values and minimization of the safety
buffer as the result of Basel II.
Luxoft successfully took over the application existed and built up the
comprehensive yet flexible solution to address all the business needs.
System initially intended for the data for RWA calculations only for
Finance and Financial Control became Golden Source for other reporting
applications shortly. The solution implemented is scalable to allow new
upstream systems to be added with the minimum efforts.
The organizational structure of the project team is complex. The cross-
companies development is applied in the project. The project team consists
of the employees from Bank and the three vendors of the project including
Luxoft as a subcontractor. The project management within the Luxoft
scope is fulfilled by both Customer and Luxoft, with the Customer manager
precedence.
The project uses Hybrid (Staff & Project) work model. Luxoft provides core
services as well as the project and process management. Few Luxoft team
members work on-site while the others work in several locations off-site.
Customer conducts his own project management and actively participates
in the process management. One of the vendors (3 members) also provides
the project management services. Another vendor (20+ members) provides
only support of the ETL component.
The iterative approach is implemented to deliver the project with the
monthly releases. The product is developed as a set of the consecutive
iterations. All iterations include a number of phases (Concept, Requirements
and Scoping Management, Development, UAT and final Production)
constrained by milestones. Iteration is finished when System with the
expected functionality is deployed on Customer’s environment.
The process of transferring the front office feeds from System is positioned
as an Operational data store activity. System is not used as a data
warehouse. System is to keep only the data necessary for operational
business use. The main technologies applied in the project are Informatica
as ETL tool (the support is provided by another vendor), Oracle as database,
Java as coding platform and Cognos as reporting tool.
System architecture is depicted below:
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4. 03Luxoft - Case Study
System main data sources are the front office trade capture and daily
valuation applications. Trade economics are available in real time. At the
end of day the data staged during the day is joined with the valuation data.
Customer has defined and developed the formats of all the feeds.
Depending on the type of source system, feeds can be divided as follows:
uu File Based Feeds (mainly CSV and TXT files).
uu Message Based Feeds (XML messages).
uu Mixed Data Feeds (CSV and TXT files, as well as XML messages).
MESSAGE
BASED FEEDS
MIXED
BASED FEEDS
FILE
BASED FEEDS
FTP
SERVER
TABLE(1) TABLE(2) TABLE(N-1) TABLE(N) PRE-STAGING
AREA(TEXT, DATA,
SOURCE SPECIFIC
STRUCTURE)
COMMON
STAGING AREA
(TYPIFIED DATA,
SOURCE SPECIFIC
STRUCTURE)
IDS
(INBOUD
DATA STORE)
(FCL, DATA
STRUCTURE)
ODS
(OUTBOUND
DATA STORE)
TABLE(1) TABLE(N-1) TABLE(1) TABLE(1)
DOWNSTREAM VIEVS DOWNSTREAM SLICES
AI2AI2
FEED
CONSTRUCTION
LAYER
FEED HALDER(2)
CORE FIELD LIST SPECIFICATION (CFL)
VALIDATION
FEED STUBMSG
FEED HALDER(2)
FEED STUBMSG
FEED HALDER(N)
CHUNKS GCDS+TE

5. 04Luxoft - Case Study
Benefits
Luxoft provided System in accordance with the schedule and on budget.
Bank successfully aligned with Basel II requirements and benefited from
using Basel II instead of Basel I calculated RWA, as well as received the great
tool to actively manage unpredictability of RWA.
Bank was provided with a highly flexible web-based strategic solution
that substituted the tactically oriented ones. The solution can be easily
enhanced to effectively provide new services. Luxoft was developing this
solution on the step-by-step basis, providing a smooth transition to the new
platform in accordance with the schedule.
Luxoft improved the effectiveness of the business processes being
implemented by System with the boosted performance. Bank was able to
eliminate the manual error-prone processing owing to System production.
The collection of Feed handler components ensures the data is handled
once received from the source systems and made available to the ETL
component. Informatica implements the ETL functionality which performs
the transformation and validation processes and publishes the data
processed to the Outbound Data Store (ODS). System processes rely on the
data mappings and workflows created by Informatica Power Center.
Data Quality subsystem is an integral part of the solution intended to
monitor all the incoming data and to create special exceptions in case
of the events. The subsystem exploits rule-based approach for the data
analysis and provides the dedicated reports on the data quality via Cognos
technology.
Adjustment tool closely coupled with System provides the users the
opportunity to make manual reconciliations and adjustments via the web-
based interface.
The data processed by System is made available to the downstream
applications via ODS. There are several main downstream systems, two of
which are developed by Luxoft along with System:
uu Credit Risk Reporting tool which performs calculation based on Basel
II requirements and provides different reports via Cognos based
subsystem.
uu IFRS 7 Disclosures Reporting tool which provides the information for
IFRS 7 compliance purposes.
The other downstream applications are used for accounting purposes
reporting.

6. About luxoft
Luxoft, a principal subsidiary of IBS Group, is a provider of advanced
application and software engineering outsourcing services for global and
regional enterprises. Luxoft builds partnerships with its clients, such as
Boeing, IBM, Deutsche Bank, UBS, Harman, Avaya, Alstom, and Sabre, based
on the culture of engineering excellence, innovation, and deep domain
expertise. Luxoft offers international delivery capability through its network
of state-of-the-art delivery centers in North America, Eastern Europe, and
Asia. Luxoft`s customers benefit from the right mix of technology skills,
industry knowledge, proprietary processes and methodologies, and a
choice of engagement models.
For more information about Luxoft, visit
www.luxoft.com
www.luxoft.com/financial-services/
© 2012 Luxoft
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